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Program: Wednesday, October 22, 2003
10/22/03: Lucent Technologies Reconnects With Profits
SUSIE GHARIB: A big day of selling on Wall Street today, stocks tumbled on disappointing earnings news. The Dow lost 149 points and the NASDAQ fell 42 points or more than 2 percent. One bright spot in today`s trading was Lucent Technologies (LU), the most active stock on the big board, which rose about 13.5 percent. The struggling telecom equipment company reported its first profit in three years. Scott Gurvey reports. SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: In what may be a glimmer of light for an industry which has been in near total eclipse for two years, Lucent Technologies said today it made money in the quarter just ended. For the telecom equipment maker which was once the Western Electric unit of AT&T (T), it was the first profit in three years. Lucent said it earned $0.02 a share in its fourth quarter. That compares to a loss of $0.84 one year ago. Analysts surveyed by First Call were expecting to see a loss of $0.04. Excluding one time gains and losses, Lucent broke even on a per share basis. Sales revenue rose 3 percent to just over $2 billion. STEVE LEVY, TELECOM EQUIPMENT ANALYST, LEHMAN BROS.: About a month ago we upgraded our rating on the industry, telecom equipment, thinking that we have hit an inflection point. And that going forward we`re likely to get more positive surprises than negative surprises. Now these results from Lucent certainly make us feel better about that overall investment view of the industry. And over time when the industry does recover we expected Lucent to recover with it. GURVEY: Not all analysts are as optimistic. While most agree that the telecom sector has bottomed out, and most were surprised by Lucent`s return to profitability, many see other companies doing better than Lucent in the quarters ahead. They argue that Lucent`s gains are mainly due to cost cutting, and that the company is short on the products, especially voice-over Internet technologies, expected to be most in demand as sales improve. ERIK ZAMCOFF, INDEPENDENT RESEARCH GROUP: In general, Lucent faces an uphill battle. Telecom capital expenditures are very constrained right now. And I believe the company is not as well positioned as some of its peers particularly in some of the higher gross segments of this constrained cap-ex pie. GURVEY: There are few signs that Lucent`s best customers, the big telephone companies, are ready to make substantial purchases of telecom equipment again. Until they do, the equipment makers like Lucent will continue to struggle. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
SUSIE GHARIB: Arnold Schwarzenegger is just weeks away from taking over as governor of California, and today he was in Sacramento making the rounds with key lawmakers. One of his biggest challenges is solving California`s $38 billion budget crisis. He also needs to improve the business climate in the Golden State. So this week we begin a three-part series, "California Crossroads," examining some of the issues facing California. And they are issues that will be critical to the state`s future. California`s economy is huge, so huge, in fact, that if it were a nation, it would be the world`s fifth largest economy. Fully 11 percent of all the jobs in the U.S. are in California, and the state`s largest industry is housing, accounting for 13 percent of all economic activity. So what are California`s top CEOs saying about the outlook for the state`s economy? Earlier today I talked with Wells Fargo Chairman and CEO Richard Kovacevich and asked for his take on where California is heading. RICHARD KOVACEVICH, CHMN. & CEO, WELLS FARGO: California`s economy doesn`t reach its potential because there`s kind of an anti-business attitude among our politicians, particularly in Sacramento. If you compare the cost in California of doing business to neighboring states, it`s about 30 percent higher. This is caused by the fact that regulatory costs are 105 percent higher than neighboring states, workmen`s compensation is 300 to 500 percent higher. Energy costs are 65 percent higher. So California should outperform the national economy because we have so much going for us in this state. But unfortunately the laws in this state cause the economy to grow much more slowly. GHARIB: Mr. Kovacevich, you have voiced concerns about the California economy. Do you think that Governor-elect Arnold Schwarzenegger can turn things around? KOVACEVICH: He can only do that with the cooperation of the legislature, and I think that`s the question. Will the legislature cooperate? The legislature should get a message in this election. Because I think the people decided that, yes, they do want a change, they want a more pro-business economy, they know that it`s all about jobs. And if the legislature and the governor cooperate, there`s no question we can make a change. I just don`t know whether that`s going to happen. GHARIB: Let`s talk a little bit about the outlook of the U.S. economy. What feedback are you getting from your large banking clients? Are you seeing any signs of demand for capital so that they can expand their operations? KOVACEVICH: I think the confidence is improving. I don`t know how many orders they`re placing at the moment, but clearly - Silicon Valley is a good example, clearly they`re seeing increases in orders and sales from what it was. I`m not sure it`s at the level yet that would sustain, say, a 4 to 5 percent growth in GDP, but it`s certainly improving. GHARIB: What about small businesses, I understand you`re one of the largest lenders to small businesses? KOVACEVICH: We are already seeing the small business person invest. There`s tax incentive to do so, and they usually are the leading indicator. Large corporations are usually the last to react to an economic stimulus in capital goods purchases, small businesses are first and we`re seeing that, which again I think is a good indication. GHARIB: I know you do a lot of banking with consumers. What sense do you have of the financial health and confidence of the American consumer? KOVACEVICH: If you have a job, things are pretty good. And you were going to spend most of what you earn, but you also read the newspaper and watch television, and you`re concerned, because of the unemployment. And so they`re not as confident as perhaps they would be if you start to see growth in jobs again. GHARIB: If the unemployment rate stays above 6 percent what impact is that going to have on your business? KOVACEVICH: Less than 6 1/2 percent unemployment still has a very strong consumer. We don`t have extraordinary credit losses. And the consumer will continue to spend and borrow. Above 6 1/2 percent is when you begin to see credit losses higher than what would be in our various models,. And so we`re kind of right at that cusp at the moment. GHARIB: I see that Wells Fargo handled a record number of new mortgages in the third quarter that you just reported yesterday, but now that interest rates are on the rise, can you continue to grow your business at this double-digit rate? KOVACEVICH: Interest rates rising means that the economy is improving, and therefore some of our businesses like commercial lending that have not grown over the past two years will begin to grow, which will offset any reductions in the mortgage business. But we should also understand that even though interest rates are rising, they`re still at all-time lows from a mortgage standpoint. And what`s happening is just the re-fi part of the market is - will significantly decline. So we think the mortgage business is still going to be strong even though less strong than it has been in the past. GHARIB: Now that the stock market is improving, are you seeing signs that your customers are withdrawing money so that they can buy stock? KOVACEVICH: No. We`re not seeing it now, but what we are seeing is a lower in-flow. I think what we`re seeing is our customers starting to come back into the market, but not at the full force that they were previously. But there is no question there`s a relationship between deposits and investments. GHARIB: Kovacevich added that even if the bank`s customers shift more of their savings into the stock market, Wells Fargo still benefits: It has numerous mutual funds and brokerage accounts. Paul? KANGAS: Susie, what`s the mood of the business community in the Bay Area? GHARIB: Well, a lot of the people that I`ve talked to are much more hopeful now that Arnold Schwarzenegger has been elected governor. He is pro-business and they think that he can make the state a better place to do business. Now the big question is whether he will get the support he needs from the California legislature, which, as you heard in my interview with Dick Kovacevich, it`s predominantly Democratic.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
10/22/03: The Travel Business Begins To Take Flight
SUSIE GHARIB: Well, Americans are hitting the road and the skies and the seas. Rising stock prices of all airline, hotel, and cruise line companies, are evidence of the rebound in the travel business. And as Jeff Yastine reports, travel agents are also beginning to see their share of the recovery. JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: More than 3000 members of ASTA, the American Society of Travel Agents, are talking shop this week in Miami Beach. At a time when the travel business is in recovery mode, agents have something to smile about. They`re seeing increases in business, after several years of post-9/11 malaise. RICHARD COPLAND, PRES. & CEO, ASTA: The resiliency of the American public is strong, and they will never give up their desire to travel. They are not traveling ten-fold, their travel patterns may have changed since 9/11. But they are traveling right now, we estimate that travel is as good as it was in 2001, 9/11. YASTINE: Travel industry stocks reflect that increased business. Shares of cruise line companies like Carnival (CCL) are up nicely in the past year, while the hotel industry with companies like Hilton (HLT), are likewise seeing a resurgence as shares move higher. Even the hard-hit airline stocks like AMR (AMR), parent of American airlines, are looking up. DAVID ROJAHN, TRAVEL AGENT: We are definitely seeing an increase in business, and we`ve noticed that not only in Colorado, but across the country too. Our market out there, because we`ve been so high-tech and high-telecommunications, we`re lagging behind the rest of the country. But even with that lag, as far as economic, we`re still seeing a surge - not a surge, but an increase in leisure travel. YASTINE: Agents are enjoying the growth while they can. For many, it wasn`t the 9/11 attacks, but the airlines slashing ticket commissions in the mid-1990s, and the Internet, that forced the biggest changes. Many agents have found new life as travel "consultants", charging a fee for informed travel advice. And the Internet, rather than killing off the business, has helped it to change and grow. COPLAND: My clients go on the Internet, they surf it. They come away with what I call "information overload." They`ve got so much information they need someone to help them make choices. YASTINE: And, agents hope, that`s one part of human nature that`s not going to change anytime soon. Jeff Yastine, NIGHTLY BUSINESS REPORT, Miami Beach.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
10/22/03: "Money File"-The Mutual Fund Gambling Game
SUSIE GHARIB: In the "Money File" tonight, knowing when to hold `em and when to fold `em when it comes to questionable mutual funds. Here`s Chuck Jaffe, senior columnist for CBS MarketWatch. CHUCK JAFFE, SENIOR COLUMNIST, CBS MARKETWATCH: It has been just over a month since the mutual fund world was rocked by allegations that several firms were playing fast and loose with the rules. What we`ve learned since then is there`s still a lot we don`t know. And as an investor, that`s a problem. Complete, in-depth information is the basis for solid decisions. And right now, we don`t have that. You`ve got four fund firms: Janus, Strong, One Group and Nation`s Funds named by Attorney General Eliot Spitzer in New York`s complaint against fund companies. You`ve got two other firms: Alliance Capital and the Alger Funds, suggesting that they allowed some questionable trading action. You`ve got those firms already saying they will reimburse fund investors for monies lost due to their "discretionary trading arrangements" with big investors. And you`ve got at least a dozen other firms that have acknowledged receiving subpoenas from regulators. You`ve also got pundits and data trackers like Morningstar suggesting you avoid the affected fund companies entirely. But there have been no formal charges filed against any fund companies, yet. There`s little doubt we have only scratched the surface here. But what`s an investor to do? If the allegations affect funds you own, it`s time for a change. But if they affect fund families with your money, but not the funds you own, don`t feel compelled to make a change yet. And if they affect funds or firms you are considering investing with, look for alternatives until the dust settles. Until we feel comfortable that all wrongdoers have been exposed, it`s time for cautious, calculated moves, not radical ones. I`m Chuck Jaffe.
Nightly Business Report transcripts
are available on-line post broadcast. The program is transcribed
by eMediaMillWorks. Updates may be posted at a later date. The views
of our guests and commentators are their own and do not necessarily
represent the views of Community Television Foundation of South
Florida, Inc. Nightly Business Report, or WPBT. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. Copyright (c) 2003 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
10/22/03:
"Paul Kangas' Stocks In The News"
PAUL KANGAS: It was a broad opening sell-off on Wall Street amid growing concerns about the market`s high valuation and disappointment over third quarter results, especially from drug firms like Merck (MRK), Pfizer (PFE) and Schering-Plough (SGP). Aggressive selling pushed the Dow to a 112-point loss by mid- morning while the NASDAQ Index fell 32 points. Heavy profit-taking in the tech sector sent the market still lower. And with no economic news out today, earnings were the only major factor influencing investors. In early afternoon, the Dow tumbled to a 150-point deficit, the NASDAQ down 40. And stocks stayed broadly lower for the rest of the session. So the Dow Industrial Average closed down 149.40 points, or 1 1/2 percent, putting it at 9598.24. The NASDAQ Composite lost 42.83 points, or 2.2 percent, ending at 1898.07. Standard & Poor`s 500 Index down 15.66 points, or 1.5 percent at 1030.36. Treasury prices rose for a fourth straight session. The 10-year note climbed 23/32 to 99 31/32, pushing the yield down to 4.25 percent.
The most active big board issue, and it was active, Lucent Technologies (LU) on 89.3 million shares, moving up $0.33, or as you heard earlier, 13 1/2 percent, on those much better-than-expected fourth-quarter results.
Then Seagate Technology (STX), a major loser, down $7.22, a 24 1/2 percent. First-quarter earnings came in at $0.40, up from $0.24 last year, and $0.04 above the Street. But the company warned hard-drive demand is easing. Also the SEC is probing all analyst reports on this company over the last three years.
NorTel Networks (NT) was up $0.11.
Pfizer (PFE), $0.88-loss there. Pfizer in with third-quarter results lower, $0.29 versus $0.38. That was largely due to with expenses having to do with the acquisition of Pharmacia. But the company did cut its fourth-quarter guidance by $0.03 a share.
Merck (MRK), another weak drug stock, down $3.19 or 6 1/2 percent. Third-quarter earnings were flat, $0.83, same as a year ago, and $0.02 below the Street estimate. Merck plans to cut 4400 jobs and also cut its fourth-quarter earnings estimate by $0.04 to $0.05 a share due to restructuring costs.
Time Warner (TWX) was down $0.49. The company in with sharply higher third-quarter results. Earnings of $0.12 versus only a penny last year. "The Sopranos" were a big factor in that gain.
Liberty Media (L) was down $0.26.
Maxtor (MXO) down $2.60. Third-quarter earnings of $0.12 versus a loss of $0.68 a share last year. But this is another hard-drive manufacturer like Seagate. And Seagate`s rather downbeat outlook I think hurt this stock.
J.P. Morgan Chase (JPM), a member of the Dow Industrials, down $1.69. Third-quarter earnings $0.78, up from only a penny last year, but revenues were well below Wall Street expectations. So the stock ended on the downside.
Ford Motor (F), tenth in volume, down $0.32 a share.
DuPont (DD), another Dow member, off $1.75. Third-quarter loss of $0.88 versus earnings of $0.47 a share the previous year. And the company also said it sees no major upturn in industrial demand. That`s probably what hurt the stock more than anything.
Eastman Kodak (EK) down $0.38. Third-quarter earnings $0.42, down from $1.15 last year.
And yet another member of the Dow, ExxonMobil (XOM), down $1. J.P. Morgan downgraded it from overweight to neutral on a valuation basis, and also doubts whether any dividend increase by ExxonMobil will meet Wall Street`s expectations.
Schlumberger (SLB) was down $3.41. Third-quarter loss of nearly $300 million. But it had operating earnings, and I stress operating earnings, of $0.41, up from $0.29 the year before. Nevertheless, Smith Barney downgraded it from buy to hold.
Finally on the upside, BellSouth (BLS) doing well, up $1.22. Third-quarter earnings nicely higher, $0.51 versus $0.34 last year. Revenues up a respectable 5 percent.
And another good gainer, Black & Decker (BDK) up $2.59. Third-quarter earnings, $1.15, not - comfortably higher than last year`s $0.95. Standard & Poor`s repeated a buy.
LeapFrog (LF) leaping in a downward direction today, off $11.65. Third-quarter earnings, $0.55, but that was $0.06 below the Street estimate. Deutsche Bank Securities downgraded it from buy to just a hold.
Another major loser, Convergys (CVG), off $4.45. Third-quarter earnings came in at $0.31, $0.02 above the Street estimate, but the company cut its 2004 earnings estimate to about $0.85, well below the Street expectation of $1.22 a share.
And Tenet Healthcare (THC) off $1.82. The company sees third-quarter results falling short of the Wall Street estimate of $0.20 a share. They are also withdrawing all of its previous earnings guidance.
NASDAQ`s most active issue was Amazon.com (AMZN), plunging $5.32. As we reported after the close yesterday, third-quarter earnings better than expected by a penny at $0.11, but today Soundview Financial brokerage downgraded it from outperform to neutral.
Amgen (AMGN) off $3.35. After the close yesterday it had better-than-expected earnings, but today Morgan Stanley downgraded it from overweight to equal weight.
Microsoft (MSFT), a $0.46-loss there.
Intel (INTC), a $0.60 drop.
Fifth in volume was Cisco Systems (CSCO), dropping $0.48 a share.
Yahoo! (YHOO) fell $1.05.
Dell Incorporated (DELL), a $0.57 loss.
And then the few gainers, RF Micro Devices (RFMD), a $0.25 rise.
Netease.com (NTES), after a big drop yesterday, coming back $0.56.
And Career Education (CECO) was up $3.35. Third-quarter earnings were up 90 percent over last year. And today the CIBC World Markets brokerage upgraded it from market perform to outperform.
Carrier Access (CACS) up $2.15. The company is in the broadband business and it had earnings in the third quarter of $0.03, versus a loss of $0.60 a share last year, a real turn-around. And revenues in the period rose 52 percent.
And finally, Internet Security Systems (ISSX) up $2.54. After the close yesterday, the company came in with third-quarter earnings of $0.12, same as a year before, but that was a penny better than Street estimates. And one of its products is also doing well.
And those are the "Stocks in the News" tonight.
Nightly Business Report transcripts
are available on-line post broadcast. The program is transcribed
by eMediaMillWorks. Updates may be posted at a later date. The views
of our guests and commentators are their own and do not necessarily
represent the views of Community Television Foundation of South
Florida, Inc. Nightly Business Report, or WPBT. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. Copyright (c) 2003 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
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